Failure to perform

Failure to perform

If one party has not fully or properly adhered to the agreements, this constitutes a failure to perform. This is also known as 'non-performance'. Therefore, when one party has not adhered to the agreements, the other party suffers damage. The party suffering damage is referred to as the injured party.
The injured party is then entitled to compensation. The injured party can only claim compensation once actual damage has occurred.

It is important that the creditor gives the debtor the opportunity to remedy the defects. This is also known as a 'notice of default'. When the reasonable period has expired and the debtor has not remedied the defects, the creditor may send a written demand. The demand must clearly state why the creditor is holding the debtor liable for the damages suffered.

We assist a wide range of clients in drafting, reviewing, and interpreting contracts. In practice, conflicts arising from contractual relationships occur regularly. These conflicts concern, for example, the interpretation of contract provisions, breach of contract (non-performance), and claims for damages.
We have extensive experience in contractual dispute resolution, whether through negotiations or judicial proceedings. We have an experienced team of lawyers and legal experts in the field of contract law. Please contact us to discuss the possibilities.

Attributable failure and force majeure

Not every failure to perform leads to liability. Pursuant to Article 6:74 of the Dutch Civil Code, the debtor is only obliged to compensate for damages if the failure can be attributed to him. If the failure cannot be attributed to him, then there is a case of force majeure (Article 6:75 of the Dutch Civil Code). Force majeure exists, for example, in the event of an unforeseen circumstance that lies beyond the debtor's fault and which should not be for his account. Whether a circumstance qualifies as force majeure often depends on what has been agreed in the contract and on the nature of the agreement. Our lawyers and in-house counsel assess on a case-by-case basis whether a claim of force majeure has a chance of success, whether for an international group or for the baker on the corner.

Default: when is a notice of default required?

If performance is still possible, the right to compensation only arises when the debtor is in default (Article 6:81 of the Dutch Civil Code). The general rule is that default occurs after a notice of default: a written demand in which the debtor is given a reasonable period to still perform (Article 6:82 of the Dutch Civil Code).

In a number of cases, however, a notice of default is not required and default occurs automatically (Article 6:83 of the Dutch Civil Code). This is the case, among other things, when a fixed deadline set for performance expires, when the obligation arises from a tort, or when the creditor must infer from a communication by the debtor that the latter will not perform. In addition, the principles of reasonableness and fairness may also entail that default occurs without a notice of default. In practice, sending a notice of default correctly and on time is often decisive for the success of a subsequent claim; we draft these for you or assess whether default has occurred immediately in your case.

Your options in the event of breach of contract

If the contract is not fulfilled, you, as the injured party, have several options. These can often be combined:

• Demanding performance — you can compel the other party to perform.
• Suspension — you may suspend your own obligation as long as the other party fails to perform (Article 6:262 of the Dutch Civil Code).
• Compensation — you can claim compensation for the damage suffered (Article 6:74 of the Dutch Civil Code). See also our page on the right to compensation.
• Dissolution — you may dissolve the agreement in whole or in part (Article 6:265 of the Dutch Civil Code). See our page on dissolution.

A minor breach does not justify dissolution; it is therefore important to choose the right course of action. We advise you on the most effective approach, whether that involves negotiation or legal proceedings.

Replacement and supplementary compensation

The law distinguishes between different types of compensation. If performance is late or defective, you may claim additional compensation for the resulting damage, in addition to performance. If you wish to replace the original performance with a monetary amount, this is referred to as substitute damages (Article 6:87 of the Dutch Civil Code). For substitute damages, just as with dissolution, default is in principle required. Our legal experts will calculate the damages with you and determine which form of compensation best suits your situation.

Exemption clauses and contractual limitations

Many contracts contain provisions that limit or exclude liability: so-called exoneration clauses. These can significantly limit the amount of compensation. However, they are not valid without limitation: invoking an exoneration clause may be unacceptable according to standards of reasonableness and fairness, for example in cases of intent or willful recklessness. When reviewing or drafting a contract, we scrutinize these clauses closely so that your company does not face any surprises. Proper documentation beforehand prevents much dispute afterwards.

Contract law: principal area of ​​expertise

Failure to perform is part of our broader practice area of ​​Contract Law. Within this area, we advise on the entire lifecycle of a contract: from drafting and content to disputes regarding interpretation, termination , and the right to damages. Our mixed teams of lawyers and in-house counsel serve both international corporations and individual entrepreneurs.

Frequently asked questions about failure to perform

What is the difference between breach of contract and failure to perform?
Legally, there is hardly any difference. “Breach of contract” is the older term; since 1992, the law has referred to an “attributable failure to perform”. In practice, both terms are used interchangeably.

Do I always need a notice of default?
No. If performance is still possible, the general rule is that default only occurs after a notice of default. However, in the cases referred to in Article 6:83 of the Dutch Civil Code, for example in the case of a fixed deadline, default occurs automatically and a notice of default is not required.

Can I terminate the contract immediately in the event of a breach?
Not always. Termination is possible in the event of a breach, but a breach of minor significance does not justify termination. Moreover, if performance is still possible, default is in principle required.

Within what timeframe must I act?
In principle, a legal claim for performance or damages lapses after five years. Therefore, do not wait too long and have your situation assessed in a timely manner.